SAN FRANCISCO (Legal Newsline)- Federal legislation that would afford trial lawyers a special tax break faces an uncertain future, says one of the chief lobbyists for the nation’s trial lawyers.

The proposal would allow attorneys to deduct fees and expenses up-front for filing contingency-fee lawsuits. The proposal amounts to about a $1.6 billion tax break for plaintiffs’ attorneys, estimates indicate.

“Everyone wants to do it, but the problem is there is not a tax vehicle yet,” said Linda Lipsen, American Association for Justice (AAJ) Senior Vice President of Public Affairs.

Lipsen was speaking to the Birth Trauma Litigation Group at the annual meeting this week of the AAJ, the trial lawyers’ trade group.

“You cannot have a stand alone bill to help lawyers … so we have to tuck it into something,” she said.

In the Senate the bill is S. 437, to allow the deduction of attorney-advanced expenses and court costs in contingency fee cases, introduced by Sen. Arlen Specter (D-PA) when he was still a Republican. The bill includes three Republican cosponsors (Crapo, Martinez, Graham), so they might be less inclined to support the legislation following Sen. Specter’s switch. The House bill is H.R. 2519.

But as Lipsen herself admits, the AAJ will be looking for a vehicle to attach those provisions to. The bills above are unlikely to move.

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The statement that other businesses are not prohibited from deducting upfront costs is not, as a general matter, correct. If a retailer buys inventory, then expensing of that inventory for tax purposes does not generally take place until until the merchandise is sold, even though cash has been paid out to buy it. If a manufacturer buys a lathe or a wave-soldering machine, he generally does not get to deduct the full amount that he has paid immediately.